Wall Street Panics Because High Speed Trading Tanks Stock Market

Wall Street breathed just a little easier and the end of trading Thursday. The Dow Jones Industrial Average finished only down 348. Earlier within the day the stock market dropped like a rock -- 1,000 points and nearly 700 points during one panic-stricken stretch. 296 stocks that fluctuated most were canceled for trade by Nasdaq on Friday. It seems that it was a toxic combination of algorithmic, or high speed, trading and fearful investors may be the culprit.
High speed panic on Wall StreetA Wall Street system that was created to prevent what happened to the stock market Thursday may have actually caused it to happen, thanks to high speed trading. When a stock price falls rapidly the number triggers a "circuit-breaker" that briefly halts New York Stock Exchange trades on it. CNN Cash.com says that at about 2:45 p.m. on Wall Street, shares of Procter and Gamble fell 10 percent. For around 80 seconds the circuit breaker prevented NYSE trading on it. The stock was in high speed play on other exchanges within the meantime.How is high speed trading working?The NYSE, down about 400 points, took a breather on P and G, Accenture, Boston Beer Co. and others. In the meantime’s, investors were afraid Greek debt crisis would leave them needing no fax payday loans were clamoring to sell. How does this high speed training work? Tiny orders are ordered each millisecond by automatic programs in computers on other exchanges like Nasdaq. The computers found no offers to buy for the stocks that had hit their NYSE circuit-breaker. High speed trading software saw the bid at $ 0. The high speed trading computers add a penny to each trade to make a commission on each and every deal. The high speed software then placed numerous bets at 1 cent. Stocks were traded all the way down which triggered a massive sell off.
High speed trading crackdown?Individuals are calling for a crackdown on high speed trading after the panic on Wall Street Thursday. Reuters reports that the massive sell-off that pushed the stock of highly regarded companies into a tailspin highlighted concerns that regulators can quickly lose control of the markets within the world of high speed trading. Democratic senators Edward Kaufman and Mark Warner said Congress needs to investigate the causes of the market plunge, which at its deepest point wiped nearly $ 1 trillion off equity values.What even is high speed trading?On Wall Street, high speed trading has caused average daily volume on the stock market to explode. The New York times reports that powerful computers have the ability to enable high-speed traders to transmit millions of orders at lightning speed and reap billions at every person else’s expense. Stock exchanges say numerous high speed traders account for a lot more than half of all the trades done. But what really is high speed trading? It is a compilation of computers that are so fast they outsmart investors, man, and machine. Evidently they also can outsmart and outrun themselves.
Sources for the articleCNN Cash.comhttp://money.cnn.com/2010/05/07/markets/explaining_wall_street_turmoil/?...Reuters reportshttp://www.reuters.com/article/idUSTRE6455ZG20100506?loomia_ow=t0:s0:a49...New York times reportshttp://www.nytimes.com/2009/07/24/business/24trading.html